Message-ID: <011801c37277$731f1f40$fa3c0043@v4dq1>
From: "Thomas H. Greco, Jr." <circ2@mindspring.com>
To: "Joseph Huber" <Joseph.Huber@t-online.de>,
	"Lub Sergio" <sergio@sergiolub.com>, "IJCCR" <ijccr@yahoogroups.com>,
	<just_trade_discussion@yahoogroups.com>,
	"Robertson James" <robertson@tp2000.demon.co.uk>
References: <004b01c3628b$7ff75e40$db5575d5@v4dq1> <3F3F56F7.32F6E685@t-online.de>
Subject: Re: monetary role of central governments
Date: Wed, 3 Sep 2003 15:56:11 -0700
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Dear Joseph,
Yes, I'm happy, too, to have a message from you.
Forgive the delay is answering, I've recently returned from a very
exhausting trip to Europe and had limited access and time to deal with
correspondence.

more below..

----- Original Message -----
From: "Joseph Huber" <Joseph.Huber@t-online.de>
To: "Thomas H. Greco, Jr." <circ2@mindspring.com>; "Lub Sergio"
<sergio@sergiolub.com>; "IJCCR" <ijccr@yahoogroups.com>;
<just_trade_discussion@yahoogroups.com>; "Robertson James"
<robertson@tp2000.demon.co.uk>
Sent: Sunday, August 17, 2003 3:20 AM
Subject: Re: monetary role of central governments


> Dear Tom, nice to hear from you again.
>
> Tax anticipation warrants. In theory, certainly consistent; in
practice,
> just another mechanism of deficit accumulation?

There can be no deficit accumulation without forced circulation. The
market will refuse or discount any credit instrument (currency) in
which confidence is lacking, IF IT IS ALLOWED TO.

> Competing currencies, no legal tender, no forced circulation of any
> currency. In theory, as you and James know well, I disagree on
grounds
> of transaction costs, efficient allocation and overall domestic
product
> and productivity; in practice, I would let you have your way -
because I
> think the chartal theory of money is right according to experience
and
> empirical facts rather than representing a scholarly dogma. The
chartal
> theory says that the currency which is preferred by the government
of a
> fairly stable nation state will be the predominant currency in
everyday
> economic life; without necessarily being enforced as legal tender.
In
> the late 19th century, when the chartal theory of money was
developed,
> central banks and their banknotes were still far from having the
> absolute status they have gained in the meantime.

I argue that transaction costs under the present regime are EXTREMELY
high because of the interest that must be paid on bank credit money,
which enjoys a legally enforced privilege. Further, because of its
artificial scarcity and misallocation, many trades that could be made
are not. That makes the exchange system inefficient in its allocation
of domestic product.

I confess I am not familiar with the chartal theory. What does it mean
to be "preferred by the government?" Does that mean forced circulation
"for all debts public and private," or merely a willingness to accept
it? I've never seen any convincing evidence to prove the point you
make that "In the late 19th century, when the chartal theory of money
was developed, central banks and their banknotes were still far from
having the absolute status they have gained in the meantime." Do you
have such evidence?

> Alternative or complementary currencies, where occurring beyond
small,
> closed communities, seem to be transitional phenomena during
economic
> crises. In certain cases, crisis might seem to be permanent. That's
why
> weak national economies tend by themselves to adopt some foreign
> currency which they think to be reliable.

I agree that, in the long run, the field will narrow down to a few
favored currencies, but the time is way past due for the field to be
opened up to competition. Actually, currencies will eventually be made
obsolete by the emergence of competitive clearing services funded by
service fees rather than "interest" charged on negative balances.

Yes, standards, will emerge.
The development of the personal computer is instructive in this
regard. In the early days there were dozens of brands, each with its
own architecture and operating system. Eventually, the market settled
on two, the IBM standard and the Mac standard. IBM was wise  enough to
open its architecture to others so that they could write compatible
software and build their own compatible computers.
IMHO, that's the way the exchange process will evolve.

> James and I have an outstanding bet on the issue of competing
> currencies: whether the British government will approve the euro as
a
> second currency for domestic circulation. For the time being,
however,
> the British government shys away from taking any decision on the
issue,
> including a referendum.

The main issue is whether the British government will surrender its
sovereignty to the European central bank by relinquising its power to
issue its credit instruments into circulation.

> I agree with you, then, that it is the role of government to declare
a
> territory-wide, homogenous system of weights and measures, and that
the
> official currency - as a standard monetary unit, not as a means of
> payment - ist part of that.

Good. I'm pleased to know we agree on that point.

>But do you really think it reasonable to
> leave the issuance of means of payment in an official currency to
> private banks and local communities instead of having the
seigniorage
> cashed in by the national government itself? Moreover, and perhaps
even
> more important, if means of payment are created out of thin air,
someone
> has to be in control, and be held publicly responsible for good
monetary
> housekeeping.

As Riegel argues throughout his writings, the people have an inherent
right to issue their own obligations as payment media, and to accept
as payment, whatever instruments they deem suitable. This can be done
within a circle of willing participants exercising their right of
association, just as in LETS. There is no reason why such clearing
circles cannot be widened to include entire regions, nations, the
world.

Further, any entity that actively offers goods or services in the
market has the capacity for issuing and redeeming currency.
"Commercial paper" is a well-established means of financing for major
companies. It must stand on its own merits. What makes it acceptable
is the company's ability to deliver value to the market. Why not issue
commercial paper in convenient denominations and allow it to pass from
hand to hand as a payment medium?  Why not make it redeemable, not in
official money, but in it own stock in trade -- goods or services.
Such currency may be issued to the extent of the "goods or service
foundation" that is available. The market will punish excessive or
improper issuance by discounting it or refusing to accept it. It is in
the issuer's own interests to avoid over-issuance, and to be
transparent about its financial details, so that the market can
properly evaluate it.

As for private banks, what basis do they have for issuing any
currency? They provide no goods to the market, and the accounting,
clearing and risk-evaluation services they provide are way
over-priced. They monetize the value of your collateral then claim the
right to charge you interest. Insane.
Banks, as we've known them, are on the way out.

No, a means of payment cannot be "created out of thin air." What is
generally lacking is a proper understanding of the nature of credit
money, and the principles for its proper issuance, circulation, and
redemption.

I encourage all to read Riegel, especially Private Enterprise Money,
and New Approach to Freedom -- all available through
reinventingmoney.com.

As for seigniorage, that's an outdated concept, applicable to
commodity money like gold or silver brought to the mint for coining
and certification. There's no need for such services with respect to
freely issued credit money, unless you mean to impose the state as a
gatekeeper between buyer and seller.

Regards,
Tom

> Best wishes
> Joseph
>
> ----
> Joseph Huber  -  Sybelstr. 37  -  10629 Berlin
> Tel +49 - (0)30 - 323 12 16           Fax  +49 - (0)30 - 327 656 34
> e-mail joseph.huber@t-online.de
> web www.soziologie.uni-halle.de/huber
>
>
>